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The most common sources of boardroom conflict

| Jun 27, 2020 | Commercial Litigation

Boardrooms are naturally ripe for disagreements. A collection of individuals, each with their own beliefs and motivations, must work together to elevate a business, all while accounting for countless internal and external factors.

Healthy disputes are natural and often productive. When these conflicts begin to boil, however, the business may experience disruptions.

This happens more frequently than many professionals realize. One survey of corporate board members found about three in every 10 respondents had experienced a boardroom dispute so severe it threatened the survival of the organization.

What is behind boardroom disputes?

Conflicts can develop quickly or simmer over a long period of time. There are many potential reasons for these disputes, but the survey pinpointed some common root causes. These sources of conflict, as well as the percentage of respondents that cited them as frequent or very frequent topics of dispute, include:

  • The financial, structural or procedural workings of the organization – 40.3%
  • The personal behavior or attitudes of directors – 4%
  • Strategy development such as mergers and acquisitions – 37.2%
  • Risk management – 31.3%
  • Change and crisis management – 30.6%
  • Audit conclusions – 29.9%
  • The board’s process (meeting structure, schedules, etc.) – 29.4%
  • Management oversight – 28.4%
  • Leadership or board composition – 24.7%
  • Family members of shareholders or owners becoming involved in the business – 21.7%

Some issues will fall into multiple buckets. Others may not belong to any of the topics listed above. Whatever the case, the organization will need to find an answer.

How to reach a resolution

When a boardroom becomes entangled in a dispute, members must tread carefully. These conversations require striking a delicate balance between the needs of the business and the desires of every individual personality involved.

Oftentimes, the least disruptive answer is found through dispute resolution strategies, either formal or informal. This often creates the fewest waves and allows the business to move forward in a healthy manner. However, this is not always possible. Occasionally, these disputes require litigation to resolve.

Whatever is needed, the organization’s leaders need to find legal clarity before things can move forward.